Differences Between Dynamic And Fixed Pricing Essay Example

Differences Between Dynamic And Fixed Pricing Essay Example

Introduction
Dynamic pricing occurs when the price of a commodity or product is flexible. This change can be influenced by a number of factors, among them the consumers, prevailing market conditions, or even the quality of the product itself. Fixed pricing in business occurs when the price of a commodity or product is static; when no external factors that can influence the change in the prince. The huge difference between the two types of pricing can be noted from the definitions of the two and from that, many more differences can be described.

The difference between dynamic pricing and fixed pricing
Most businesses prefer dynamic pricing to fixed pricing because it allows a balance to be created in the simultaneous reduction of demand and also the increase of revenue. This means that when the demand of a product increases then the seller can choose to increase the in order to attain a greater profit and thus developing the business (Association, Alliances, Teaming, & Committee, 2005). In contrast, fixed pricing is always static and cannot be changed even when the demand of that product is high or even when an increase in revenue is needed. This may in the long run lead to losses or even debts to the business (Schwind, 2007).
When the cost of the product greatly exceeds that of dynamic pricing the favor shifts on the side of fixed pricing and this is because of the market and how the buyers or consumers will go for the one on fixed pricing as opposed to the other one, which is highly priced. The demand here reduces because of pricing. In some instances when the long-term average price of the goods is taken into consideration the cost of change in price is usually less important (Weber, 2008).

References
Association, A. B., Alliances, S., Teaming, & Committee, S. ( 2005). Guide to fixed-price supply subcontract terms and conditions: a project of the Strategic Alliances, Teaming, and Subcontracting Committee, Section of Public Contract Law, American Bar Association. Washington: American Bar Association.
Schwind, M. ( 2007). Dynamic Pricing and Automated Resource Allocation for Complex Information Services: Reinforcement Learning and Combinatorial Auctions. Columbus: Springer.
Weber, W. K. (2008). Dynamic Pricing: Strategies to Grow Profits in the Hospitality Industry of the 21st Century. Arundel: BoD – Books on Demand, 2008.
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